Crypto investors could be forgiven for thinking this week took place in 2024. That was a year full of rallies for all manner of coins and tokens, after all.
Over the past five trading days, a dizzying number of altcoins posted double-digit gains. According to data compiled by S&P Global Market Intelligence, popular utility token Solana (SOL 6.26%) rose by almost 15% over that stretch — and that was a modest gain compared to other cryptos. Chainlink (LINK 3.24%), for example, rose by 22% while Litecoin (LTC -7.88%) scored a 30% gain. Aave (AAVE 0.00%) ended the week 16% higher.
Coins and tokens Trump the market
As any crypto-head can attest, coins and tokens tend to trade more or less in sympathy. They also have a habit of following the leader — Bitcoin (BTC 2.14%), of course. Sure enough, Bitcoin was a hot item right out of the gate this week, zooming from under $90,000 Monday morning to nearly $106,000 (close to its all-time high) before cooling down a touch late Friday afternoon.
Optimism is in the air for any kind of cryptocurrency, though. Much of this has to do with politics, as we’re just in front of Donald Trump’s second inauguration as president.
He’s pledged to introduce more crypto-friendly policies than the Biden administration, whose officials at times seemed to be ill-disposed to the industry. Among other moves being considered are a strategic Bitcoin reserve, which at one point Trump opined would be a “permanent national asset to benefit all Americans.” If created, the reserve would surely provide plenty of juice to the leading coin and the altcoins that march to its beat.
I should caution, though, that not everyone in the professional investing world believes this is a good idea. Several have criticized it, including Anthony Georgiades, who’s general partner of Innovating Capital, an investment firm.
In an interview with crypto news site Coindesk, Georgiades said that such a move might be tantamount to a “nationalization of digital assets.” After all, one of the appealing features of cryptos is that they’re decentralized, and not under the control of a central bank or government authority.
“This nationalization of digital assets might potentially weaken [decentralization] efforts over time,” he added.
The water’s getting a bit warm
This latest rally feels a bit over-optimistic to me. It feels like investors are now betting on Trump’s team to implement every one of the speculated crypto-boosting measures. While they’re certainly in a good position to do so — particularly since the Republicans control both chambers of Congress — there’s always a fair distance between an administration’s promises and actual implementation. Buyers, please beware in the coming days.
Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Aave, Bitcoin, Chainlink, and Solana. The Motley Fool has a disclosure policy.